Creating a Chinese Company

Before you create a Chinese company in mainland China make sure you fully understand whether you need to do this. You should create a Chinese company if you are planning to sell directly in China to the end consumer or wholesaler where the transaction has to be completed in China.

This does not apply to an on-line store where the simpler solution is to operator the store outside China with online marketing in China pointing to your store outside China.

Examples of why you might need a Chinese business:

Production costs cheaper in China

Chinese government grants available

Local Chinese investment available

Local Chinese overseas branded services – e.g. coffee shop brand

We would only recommend you consider creating a Chinese business if you have looked at all the other options first – see Routes to the Chinese market.

Access to China has setup a number of businesses in China and to that end we can write a book on the subject. As the business rules and regulations are changing and evolving in China we listed a few points to help start the planning process to create a Chinese business.

Find a local agent in your country who can advise and help setup your Chinese business or local trading organisation and who can advise your business on the right approach to trading in China.

Be very clear what trading rights you are looking for in China. There is some restriction on overseas own business trading in China.

In creating the company, you will need to declare what areas of business you are trading in. You will need to trade in China within your declared trading area or have it changed / updated as your Chinese business develops.

Make sure that your brands can be registered in China. Your brand / trading name may already be registered to another company.

Check the import requirements of any products you are planning to sell in China. Test the import requirements by sending samples of products through Chinese customers.

Find and appoint a Chinese General Manager. The General Manager is legally responsible for the Chinese business which included all monies in China. If the business breaks any of the Chinese rules and regulations the General Manager is legally responsible. It is not an easy role for a Chinese person as lot of the overseas business trading methods will need to be adapted for the Chinese business.

The Chinese business has to set up with declared capital. You can create a Chinese with one $US dollar capital.

Capital can be paid into a company over five years.

Businesses are mainly measured in China based on their registered capital and the number of staff employed.

A local Chinese bank account will be required deposit the monies need to run the business. This can be an international bank name; e.g. HSBC. All international branded banks in China will operate to the Chinese banking rules and regulations, so for the purposes of day to day trading in Chinese a local HSBC is a local Chinese bank. You will not be able to control your Chinese bank account from your local bank branch.

Capital can be transferred into China in stage payments over two years. If the capital is not put into the Chinese company to the agreed payment schedule, which has been filed at the Chinese bank at the outset, your Chinese company can be closed by the Chinese authorities on the advice of the Chinese bank.

Different tax rates apply to different types of business.

If you are creating a factory in China make sure you understand the local trading rules. Some factories are built for exporting only. You cannot sell your goods to the Chinese market unless you send the goods out of China first and then reimport them.

Land is only leased- 50 years for a business and 75 years for private apartment or house. Chinese government companies own their land. When a Chinese government company passes from public ownership to private ownership the 50-year lease rule applies.

The minimum running costs for a shell company in China is about $1,500 per month which should include local monthly and annual filing of papers and tax returns.